Comcast Moves Goal Posts for NBC Sports

Less than three months after Comcast took control of NBC Universal, new CEO, Steve Burke, is angling for sports deals and pushing a big shift in how the entertainment company would use them. Jessica Vascellaro has details.

By

Jessica E. Vascellaro And

Matthew Futterman

Updated April 15, 2011 12:01 a.m. ET

Less than three months after Comcast Corp.CMCSA0.08% took control of NBCUniversal, NBCU's new CEO, Steve Burke, is angling for sports deals and pushing a big shift in how the entertainment company would use them.

Mr. Burke, who had been chief operating officer of Comcast, has long been interested in building a more viable competitor to Walt Disney Co.DIS-0.02%'s ESPN. Comcast's own Versus sports network hasn't been much of a contender. Now, he's scouting out new deals in college sports and with the International Olympic Committee and the National Hockey League, people familiar with the matter say.

Major Sports Properties and Who Wants Them

NBC is accustomed to digging deep into its pockets for sports programming. The difference now, though, under Mr. Burke, is that the days of NBC hoarding marquee coverage for the broadcast network are over. Instead, in a move that signals just how far the major media companies will go to push major sports events onto pay-TV, NBCU will bid for deals only when coverage of popular sporting events can be split across the combined company's cable-TV and broadcast assets.

It is part of Mr. Burke's broader attempt to break down the walls between Comcast and NBCU's cable networks and broadcast business, as he tries to prove that the cable company's $13.45 billion purchase of a controlling stake in the entertainment giant can revitalize NBC and transform Comcast beyond its core business of being a cable-TV service provider.

People familiar with the matter say the old NBC sports regime, led by the vocal Dick Ebersol—an industry legend closely associated with NBC's patriotic Olympic coverage—is adjusting to Mr. Burke's new approach. How successful it will be remains unclear. Comcast has vowed it will do deals only if it can make money on them. How many it can win with that approach, even while leveraging its cable networks, remains unclear.

Mr. Burke's first big push is a play for rights to the Pac-12 college sports conference, which includes football, basketball and other sports from a variety of Western universities.

Comcast is one of a number of companies pursuing a deal with the Pac-12 conference's commissioner, Larry Scott, people familiar with the matter say.

It is a closely watched deal for the industry. After the Pac-12, the Big East is the only major conference with media rights available before 2016. Meanwhile, sports programming, long a cash-cow that drives up carriage fees for cable but now largely a loss-leader on broadcast, is getting more important as they try to bulk up on live programming that customers are less likely to watch on-demand or online.

The Pac-12 conference is seeking a 10-year deal worth $220 million a year, plus a commitment to launch a regional sports network, people with knowledge of the talks say. Start-up costs for such a venture would likely run in the neighborhood of $100 million, most of which would come from the media partner. Negotiations are likely to conclude in the next few weeks.

Executives including Comcast CFO Michael Angelakis, Matt Bond, who oversees content distribution, and Jon Litner, who leads Versus and the company's regional sports networks, see a deal as a potential rainmaker that will improve the Versus sports network and allow the company to collect carriage fees for a Pac-12 network, according to people familiar with the matter.

They also fear watching another company launch a Pac-12 network and then being forced to pay to include it on their cable systems, these people said.

NBC already broadcasts Notre Dame football on many fall Saturdays and would work around that schedule.

News Corp.'s Fox, which already broadcasts some Pac-12 games, is in the bidding mix too, keen to expand the partnership to gain valuable programming for its regional sports network, Fox Sports West, according to people familiar with the matter. The network is scheduled to lose the Lakers next year. Fox's deal with the Dodgers expires in 2013. News Corp. also owns The Wall Street Journal.

Time Warner'sTWX-0.45% Inc.'s Turner and ESPN have also held talks with the conference and are considered viable bidders, according to several people familiar with the matter.

The bigger test of Comcast's strategy will be rights to the next set of Olympics, which the International Olympic Committee hopes to award in June. Comcast is already locked in "a robust discussion" about how much it should bid and about Mr. Burke's new approach, according to two people familiar with the matter.

The Olympics have been a treasured property for NBCU, which has broadcast all of them in the 21st century. But after years of making money off the Olympics, the company— which spent $2 billion for the rights to the 2010 and 2012 games—lost $223 million on Vancouver, and may suffer another substantial loss next year in London.

Comcast executives have determined that investing in the Olympics makes financial sense only if they can acquire all the Games from 2014-2020, instead of just the 2014 and 2016 events, to give it enough time to try to negotiate multiple fee increases with pay-TV companies, people familiar with the matter say.

In addition, they would likely put some high-profile Olympic events on cable channels, such as Comcast's Versus and the Golf Channel, because it would allow them to raise their monthly fees. The company also is eager to prevent ESPN, News Corp. and Turner from winning any fee increases that its cable business would have to pay.

Prior to the NBCUniversal acquisition, Mr. Burke bulked up on sports, as Comcast acquired stakes in regional sports networks and gained rights to franchises like the NHL.

Versus has remained a second-tier player, with programming including the NHL, the Tour de France and bull-riding. Versus hasn't been able to gain full distribution—it's currently in about 79.8 million homes, compared with more than 100 million for ESPN and ESPN 2. Nor has it been able to charge a premium in carriage fees.

Versus costs cable operators about 28 cents per month per subscriber, according to research firm SNL Kagan, compared with more than $5 for the full lineup of basic ESPN channels.

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